The yen was lower against all 16 of the world's most- actively traded currencies over the past month, with the biggest losses versus higher-yielding currencies such as the Australian and New Zealand dollars. Borrowing costs in both countries are 5.75 percentage points and 7 percentage points higher than those in Japan, respectively.

``The yen's downtrend will continue as Japanese, who are fed up with low returns, will continue to export capital,'' Tokyo-based Umemoto said in an interview on April 2. ``Individuals will play the leading role.'' The fastest pace of growth in three years in the quarter ended Dec. 31 gives individuals greater confidence to send money offshore, he said.

Overseas assets held by Japanese households reached 46 trillion yen ($387.2 billion) in 2006, nearly 10 percent of the nation's gross domestic product, but only 3 percent of their total financial holdings, based on Umemoto's own calculations.

Breathing RoomThe Japanese currency traded at 118.85 per dollar at 3:04 p.m. in Tokyo from 118.96 late in New York yesterday. The yen is down 0.9 percent this week, the first of the fiscal year that started April 1.

It gained 1 percent last quarter as some investors exited carry trades, where they borrow and sell yen for better returns elsewhere, because of a global slump in stock markets.

``It's likely that there's breathing room for households to shift money from safe but low-return deposits to riskier, higher return assets abroad,'' said Masafumi Yamamoto, a strategist at Nikko Citigroup Ltd. in Tokyo and a former Bank of Japan currency trader. ``The Japanese ratio at 3 percent does not look particularly high.''

Yamamoto is less bearish on the yen than his counterpart at Barclays, predicting the currency will fall to 119 a dollar by June 30. He said Japanese overseas holdings rose 27 percent last year from the previous year, citing data compiled by the Bank of Japan, monthly data from the Investment Trust Association Japan, and Citigroup's own estimates.

Bank DepositsJapanese mutual funds boosted purchases of assets abroad to about 40 percent of the total from about 8 percent in 2002, according to the Investment Trust Association. The mutual funds now have about $244 billion of assets denominated in foreign currencies, including $98 billion in the U.S. dollar.

The yen weakened 5.9 percent versus the New Zealand dollar and 5.3 percent against Australia's currency in the past month. Australian and New Zealand 10-year government bonds both offer a yield premium, or spread, of 4.20 percentage points over similar-maturity Japanese debt. Securities in Germany give an extra 2.4 points.

The ratio of Japanese household savings parked in banks and post offices accounted for about half of their total financial assets of 1,550 trillion yen, compared with 10 percent in the U.S. and 30 percent in Europe, Barclays' Umemoto said. That will continue to decrease as more funds go overseas, he said. ....

Japan is seeing a rise in so-called margin trading, where retail investors borrow part of the money necessary to buy currency, seeking to make a profit on price gains. ``The presence of foreign-exchange margin traders is increasing in Tokyo,'' said Kenichiro Yoshida, a senior economist and currency analyst in Tokyo at Mizuho Research Institute, a unit of Japan's second-largest lender by assets. ``Younger generations such as in their 30s are trading currencies even by mobile phone.''

Individual PowerJapanese individuals' foreign currency-denominated assets exceeded 40 trillion yen in 2006, topping such assets held by life insurers, the Nikkei newspaper also reported on March 31, excluding the estimated amount of foreign-currency positions by Japanese foreign-exchange margin traders.

Life insurance companies, commonly known as Seiho in Japanese, used to play a major role in the financial markets of the late 1980s during Japan's asset-inflated bubble economy by purchasing massive amounts of foreign bonds.

``We cannot ignore individual power,'' said Ryohei Muramatsu, manager of Group Treasury Asia at Commerzbank in Tokyo. ``Japanese individuals account for about 20 percent to 30 percent of foreign-exchange margin trading in the Tokyo time zone. Institutional investors will lag behind households.''